1 Potential Red Flag for Apple's iWatch

Apple’s next big product must overcome its own big problems before its market ready according to reports.

Jan 7, 2014 at 2:00PM

Although it has yet to be announced, plenty of investors, analysts, and tech observers are expecting tech powerhouse Apple (NASDAQ:AAPL) to unveil its much-discussed iWatch at some point in 2014.

Short of an actual announcement, there are still plenty of reasons to believe Apple has a smart watch waiting in the wings. But if one recent report holds even a glimmer of truth, the world's largest publicly traded company still has a very long way to go before its iWatch is ready to hit the shelves.


Source: Apple

Production problems persist
According to reports, it appears yields on a key component of Apple's iWatch have been absolutely abysmal.

Citing sources with detailed knowledge of Apple's upstream Asian supply chain, Taiwanese tech site Digitimes has claimed Apple is currently seeing yields of lower than 50% for some portion of its iWatch manufacturing process, specifically with the metal injection molded chassis production process, or MIM for short. This is a common manufacturing process that enables the mass fabrication of products with complex industrial designs.

And apparently it's giving Apple fits in the case of the iWatch.

Now before getting too carried away with the news, it's worth noting that Digitimes has a somewhat dubious history when it comes to these kinds of rumors, so take it with a grain of salt. But given Apple's penchant for complex and highly customized product designs, it's not too far fetched to think Apple could be encountering such issues. The news also seems plausible as Apple isn't the only tech name struggling with production yields with its smart watches. The rumor mill has also cited Qualcomm as encountering similar production-process issues with its Toq smart watch as well.

And if these rumors indeed prove correct, it could mean bad news for Apple and its investors as the smart watch market as a whole appears set to take off in 2014 with or without Apple.

Competition rising
This could be a defining year for the smart watch. Aside from tech companies like Qualcomm and Samsung that already have smart watches on the market, names including the likes of Google, Nokia, LG, Nike, Microsoft, and many more have also been referenced as either having smart watches currently in development or serious plans to do so under way.

But even with so many names possibly developing their own smart watches, sales are predicted to remain muted on an absolute basis for 2014. Recently, the chief economist of the Consumer Electronics Show, which began yesterday, predicted the smart watch market would only ship 1.5 million units in 2014.

Between the relatively limited options currently available and the reported manufacturing difficulties, it certainly seems plausible that this growth market could still be some time in the making. But with the global watch industry generating around $60 billion in annual sales, it seems there's ample economic opportunity in this space.

Apple could still change the game
Although there are only rumors to support the notion at the moment, it certainly seems Apple is once again perfectly positioned to add the watch industry to the long list of things it has helped revolutionize.

True, Steve Jobs is no longer calling the shots at Apple. And yes, current Apple CEO Tim Cook isn't known as a "product guy." But as a company, Apple's true expertise has always been in attractively integrating hardware and software into a powerful ecosystem that developers love to support.

But in order to revolutionize the global watch industry, it appears Apple could have to overcome its fair share of supply-chain issues in order for its next game-changer to hit the market in 2014.

A better bet than Apple for 2014
There's a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Fool contributor Andrew Tonner owns shares of Apple. The Motley Fool recommends Apple, Google, and Nike. Follow him on Twitter @andrewtonner. The Motley Fool owns shares of Apple, Google, Microsoft, Nike, and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information